IMF’s Lagarde, Egypt’s Morsi meet in Cairo to discuss country’s economic strategy ahead of possible IMF loan (photo: Amr Abdallah Dalsh/Reuters)
MIDDLE EAST
“The authorities have indicated that Egypt would like the IMF to support Egypt’s economic program financially to help the country recover and to lay the foundation for strong growth that benefits all,” Lagarde told reporters August 22 after meetings with President Mohamad Morsi, Prime Minister Hesham Kandil, Finance Minister Mumtaz El-Saieed, and other senior Egyptian officials. Egypt has said it is seeking a loan of $4.8 billion.
“We are responding quickly to this request. A technical team will be arriving in Cairo in early September to work with the authorities on their program and discuss possible forms of financial support from the IMF.”
She said that Egypt faced considerable challenges, including the need to restart growth and reduce budget and balance of payments deficits. She also emphasized the importance of creating jobs and supporting small and medium-sized enterprises.
“Getting the country’s economy back on track and raising the living standards for all will not be an easy task. The Egyptian people have legitimate expectations for a better life and greater social justice. We at the IMF stand ready to help,” she said.
Managing the transition
Lagarde said she was pleased to meet with Egypt’s new economic team and to see firsthand how the country is managing its political and economic transition.
“The IMF will accompany Egypt as it undertakes this challenging journey,” she stressed. “It's an Egyptian journey and the IMF is a partner in that journey."
“We are impressed by the strategy that President Morsi and Prime Minister Kandil have proposed during our meetings today,” Lagarde said at a press conference attended jointly by Kandil.
“We prefer foreign borrowing at this stage given the low interest rate of the IMF loan compared to much higher rates when borrowing domestically,” Kandil said. He added that “borrowing domestically would crowd out the private sector and the IMF loan would help us avoid that.”
Close dialogue
The IMF has maintained a close dialogue on economic policy with the Egyptian authorities since the start of the transition triggered by the Arab Spring and has provided considerable technical assistance upon request from the government.
Lagarde’s visit to Egypt is the second to an Arab country going through transition, after her visit to Tunisia earlier this year.
The possible financial support to Egypt would be part of the IMF’s commitment to help Arab countries in transition. With the recent approval of two programs, one for Jordan and the other for Morocco, the IMF has committed to support the region with over $8 billion. The IMF also provided financial support for Yemen earlier this year.
Egypt had three IMF-backed programs between 1991 and 1998 (two Stand-By Arrangements and an Extended Fund Facility; the last two programs were precautionary).
